IMF Executive Board Approves US$ 93.75 Million Disbursement Under the Rapid Credit Facility for the Republic of Yemen

Press Release No. 12/121
April 4, 2012

The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of an amount equivalent to SDR 60.875 million (about US$93.75 million) for the Republic of Yemen under the Rapid Credit Facility (RCF) to address its urgent balance of payments needs. The approval allows for the immediate disbursement of the full amount, which represents 25 percent of Yemen’s quota in the IMF, to support the country’s economic recovery program following a prolonged political crisis.

The Executive Board also took note of the authorities’ cancellation of the arrangement under the Extended Credit Facility (ECF), which was approved on July 30, 2010 (see Press Release No. 10/306). That arrangement went off track during the country’s political crisis.

Following the Executive Board’s discussion of the Republic of Yemen, Ms. Nemat Shafik, Deputy Managing Director and Acting Chair, made the following statement:

“A year long political crisis and civil unrest have taken a serious toll on the Yemeni economy, endangering the humanitarian situation. Economic activity fell sharply in 2011 on the back of deteriorated security, fuel shortages, and lack of bank financing. Damage to a key pipeline, which carries one-third of the country’s oil production, has exacerbated the situation, prompting the government to compress public investment. Economic recovery is expected to be slow.

“Yemen is also facing major economic challenges that require significant structural reforms, particularly to facilitate a smooth adjustment to declining oil production. Bolstering medium-term prospects for non-hydrocarbon growth is critical to reduce the very high unemployment and poverty levels.

“The Fund-supported program will help the authorities tackle pressing economic challenges while giving them time to formulate their medium-term strategy to address structural issues. It focuses on maintaining macroeconomic stability, meeting basic needs, and safeguarding foreign exchange reserves. Fiscal policy will remain prudent, while spending is being redirected toward social and development needs. Monetary policy will support the recovery while keeping inflation in check.

“The role of donors is crucial. Financing needs are likely to remain large as the political crisis has worsened poverty and unemployment conditions and severely impacted tax revenues. The authorities are committed to increase non-hydrocarbon resources, but the level of spending on social and infrastructure projects will hinge on the amount of support that donors will provide.”